If the IRS Was Targeting Karl Rove's Shadowy Group, It Was Doing Its Job

April 11, 2014

Just in time for the final days of tax season, Republicans are doing their best to stir a new round of outrage over the IRS’ close scrutiny of conservative groups seeking nonprofit status. On Wednesday, the House Ways and Means Committee made a big show of voting to release documents from its inquiry into former IRS official Lois Lerner, to refer her case to the Department of Justice for possible prosecution. On Thursday, the House Government Oversight and Reform Committee, led by Darrell Issa, voted to hold Lerner in contempt for refusing to answer the committee’s questions.

Somewhat lost in this latest round of theater has been the truly breathtaking gall of the new source of outrage being mustered against Lerner and the IRS. It was understandable enough when conservatives erupted last year over the initial reports that small Tea Party groups had been singled out for special scrutiny—heck, even your humble correspondent questioned why the IRS was spending so much time with the likes of the Wetumpka Tea Party when vastly larger groups were managing to spend tens of millions of dollars on elections with seeming impunity. Months later, though, it is increasingly apparent that those initial reports of political targeting of Tea Party groups were overstated. And so Republicans and conservative commentators have now taken up a new, more brazen charge: that Lerner was in fact really conspiring to go after the biggest conservative groups, especially Crossroads GPS, the group co-founded by Karl Rove.

The most troubling new evidence are documents showing that Ms. Lerner actively corresponded with liberal campaign-finance groups Democracy 21 and the Campaign Legal Center, which had asked the IRS to investigate if conservative groups including Crossroads GPS were violating their tax-exempt status. After personally meeting with the two liberal outfits, Ms. Lerner contacted the director of the Exempt Organizations Examinations Unit in Dallas to ask why Crossroads had not been audited.

"You should know that we are working on a denial of the application," Ms. Lerner wrote in an email. "Please make sure all moves regarding the org are coordinated up here before we do anything." The Cincinnati agent assigned to the case at the time, Joseph Herr, noted on his timesheet, "[b]ased on conference, begin reviewing case information, tax law and draft/template advocacy denial letter, all to think about how best to compose the denial letter."

Imagine that: an official tasked with overseeing the awarding of tax-exempt 501(c)(4) status to groups claiming to be engaged in promoting “social welfare” was urging that her division take a closer look at the large group that was most flamboyantly flouting the rules governing such groups. Crossroads GPS is an offshoot of American Crossroads, the original group co-founded by Rove. The key difference between the two groups is that American Crossroads is explicitly a “SuperPAC” geared toward spending on elections, and as such must disclose its donors. Crossroads GPS is set up as a 501(c)(4) “social welfare” group that, under IRS rules, does not have to disclose its donors, as long as less than half of its spending is devoted to elections. Not surprisingly, the more secretive Crossroads GPS spent a lot more on the 2012 elections than American Crossroads—while the regular Crossroads group raised spent $50 million on the 2012 campaign, GPS spent $123 million, $22.5 million of which came from a single anonymous donor. In fact, Crossroads GPS has been spending so much on elections that it appears it may have broken even the very lenient rules governing “social welfare” groups. TheWashington Postreported in January:

The legal staff of the Federal Election Commission concluded in a just-released document that Crossroads GPS, a nonprofit organization backing conservative causes, probably violated campaign finance rules with its political spending in the 2010 midterm elections.

The law department’s 2012 conclusion… shows the FEC staff’s reasoning in recommending an in-depth investigation of Crossroads GPS, which was founded by Karl Rove and others in 2010….Some outside observers say the findings in the legal staff report — based on an analysis of 2010 spending — are unusual.

“It is significant that the staff concluded that there was sufficient evidence to either investigate or settle the matter,” said Lawrence Noble, a former general counsel to the FEC who is now a lawyer advocating for campaign-finance reform in the private sector.

So Crossroads GPS is going to be held to account? Fined, or perhaps even shut down? Ah, no.

The recommendation, released quietly by the FEC on Friday afternoon, will have no effect on the organization because the FEC did not act on it. The commission deadlocked 3 to 3 when considering the proposal in December.

The six-member panel of commissioners is split ideologically, a divide that has stymied its ability to take action on many major campaign-finance issues in recent years.

To recap: the professional staff of one agency tasked with monitoring election spending by undisclosed donors found that Crossroads GPS had likely broken the rules, but this finding will go nowhere because the agency’s board is frozen in partisan gridlock. You might think that Crossroads GPS and its supporters would count their lucky stars and quietly go about their business of continuing to push into the gray area that allows groups like theirs to spend tens of millions of dollars from secret donors.

But no: the very group that was found to have likely broken the rules by the staff of one agency is now held up by its boosters as the victim of persecution by the staff of another agency, one that has the ability to deliver a real penalty, by revoking the group's 501(c)(4) status. This claim of persecution is being mounted even as the findings of the first agency strongly suggest that the second one was simply doing its job. This is rather like expressing outrage over being investigated for shoplifting by the police when the store’s security team already completed the internal review, complete with a hidden-camera clip that showed you stuffing a dozen designer neckties into your pockets.

In this case, though, such brazenness prevails. With every wild insinuation flung at Lerner and the IRS, the odds that the agency will actually hold groups like Crossroads GPS to account in the near future diminishes. Which just points, again, to one of the fundamental flaws in the reasoning of the conservative majority in the two major Supreme Court campaign finance rulings of recent years, 2010’s Citizens United v. Federal Election Commission and last week’s McCutcheon vs FEC. Both rulings are premised on the notion that there is a functioning regulatory regime in place to oversee the larger-scale campaign spending unleashed by the two rulings. This week’s bout of faux-outrage against the IRS makes a mockery of this assumption. The rules are a joke, and Crossroads GPS is not only chortling at them, it has now broken into an open guffaw.